Infosys results look good only when compared to TCS

Infosys’s Q1 results are better than TCS’s, and to that extent come as a relief, but a 2.7% revenue growth is hardly a sign of recovery or return to double-digit growth
14 July 2017, Bangalore: Vishal Sikka CEO of Infosys, at AGM in Bangalore. (Livemint)

After Tata Consultancy Services Ltd’s (TCS) weak performance in the June quarter, Infosys Ltd’s results came as a relief for investors. Its revenues grew 2.7% in constant currency terms, in line with analysts’ estimates, while profit margins were far ahead of the Street’s expectations. TCS disappointed on both revenues and margins.Infosys shares rose 3% in early trading, even while TCS fell by nearly as much. While the latter’s shares, understandably, continue to be under pressure, Infosys’s shares have given up most of their gains. After all, while the company’s reported profit may be more than what analysts had estimated, nothing material has changed on the ground.At the end of the day, growth in the core business remains sluggish. As the chart alongside shows, year-on-year volume growth has fallen below the levels it stood at when Vishal Sikka had taken over as chief executive officer. According to an analyst at a multinational brokerage, it’s likely the half decent June quarter numbers were boosted by the GST (goods and services tax) project being handled by the company. Growth in core markets, he says, was far more subdued. For instance, growth in North America stood at just 1.3% sequentially, far lower than the company average.